Nike Strategic Analysis

Introduction

Every box of Nike shoes states, "engineered and built to the exact specifications for championship athletes around the world." Nike has become the measuring stick in the world of merchandising and endorsing. Top athletes around the world are often seen with a famous Nike swoosh on their shoes. It is not uncommon to see some form of Nike product everywhere you look.

It all begins with Phil Knight, a competitive runner, who incorporated Blue Ribbon Sports in Oregon in 1968. Blue Ribbon Sports was the first to receive the "swoosh" logo, but changed its name to Nike in 1978. Nike means "the goddess of victory," which is exactly what the company has had since its creation. The "swoosh" logo is automatically associated with the company name by just about anyone in the world. The meaning for Nike has lived up to the company's expectations.

Now, NIKE is the world's number one shoe company and controls more than 40% of the athletic shoe market.

The company designs and sells shoes for just about every sport, including baseball, volleyball, cheerleading, and wrestling. Nike doesn't only sell athletic shoes, but a wide variety of sporting goods and clothing; they design, develop, and market high quality active sports apparel, equipment, and accessory products. Their huge lines of products are designed for just about every sport in existence. Their products are made for men, women, and children of all ages. In addition, it operates NIKETOWN shoe and sportswear stores and is opening JORDAN in-store outlets in urban markets. NIKE sells its products to about 19,000 US accounts, in about 140 other countries, and online. Chairman, CEO, and co-founder Phil Knight owns about 36% of the firm.

Nike currently contracts with 25 factories in 8 countries in Central & South America - 22 apparel and 3 footwear factories. The contract factories employ more than 23,000 workers, approximately 70% are women and 30% are men. Honduras was the first country where Nike products were made, with Ecuador and Guatemala being the newest production countries. Nike has production-related employees who regularly visit the factories in Central & South America and conduct SHAPE inspections, as well as full-time Corporate Responsibility Compliance staff who oversee factory compliance.

Nike currently employs 20,700 employees, with total sales of $8.78 billion. Nike and the athletic shoe industry have evolved into one of the most competitive market in recent years.

Environmental Analysis

External Environment

Economic

- Growth/ Slow down in the economy

- Transition toward a common currency in Europe

- Interest Rate changes

- Increase outsourcing manufacturing

- Low value of the Dollar compared with the Euro

- Increase of inflation and unemployment in Asia and Latin America, and Russia

- Unemployment rates

Social Cultural Demographic

- Consumers are brand conscious

- Changing youth markets who are mostly interested in boots, and sandals.

- Generation Y very different from baby-boom generation (advertising/styles)

- New fashion style for athletic shoes (retro)

- Women's sport players and leisure fitness participants

- Decline in interest in health and fitness awareness and practices

- Revenue Increase for the minorities

- Population getting older

Political/Governmental/Legal

- NAFTA and GATT reduced import/export

- Access to international markets and tariff cutbacks as provided by GATT

- Formation of the European Union and the introduction of the Euro

- EU enforcement on imported athletic footwear from China and Indonesia anti-dumping duties

- U.S.'s diplomatic relations with countries such as China and Vietnam

- Local laws on labour and mainly on child labour

Technological

- Generation Y members prefer to use the Internet as a source for product information

- Mass Customization

- Production more efficient

- Intranet enable better communication inside the company

Competitive Forces

- It is a monopolistic type of industry

- The Competitors are Reebok, Adidas, Fila, Puma, K-Swiss, Asics, and New Balance in the athletic shoe industry.

- New Competitors: Nautica, Tommy Hilfiger

- Fashions shoe brands: Vans and Skerchers

Opportunities

1) New Technology for products development and production.

2) Emerging markets such as China and India, Mexico, and South Africa

3) New trends for products such as boots and sandals.

4) Global marketing events that can be utilized to support the brand such as the Soccer World Cup and The Olympics Games

5) Increase of the female consumer market.

Threats

1) Buys and sells in different currencies and so costs and margins are not stable over long periods of time.

2) Fierce competition both domestically and internationally

3) Increased European competition and US competition.

4) The retail sector is becoming price competitive namely with Internet

5) Change